SEZ Troubles ... Again

On Monday, the government of Goa decided to scrap all SEZ projects in the state, as reported in the Hindu. Today’s Hindustan Times has an editorial which provides more details:

The decision was taken after a panel, set up to study the viability of the SEZs, observed that these tax-free havens were not “right” for Goa’s development. It added that the proposed SEZs would not match the talent skills in Goa, would further burden the existing infrastructure and will not create any employment. Goa has three notified SEZs — a pharma hub and two other Information Technology (IT) and IT-enabled services (ITeS) ones. The state had also sought permission to set up seven more SEZs, and allotted over 1,500 acres of land through the Goa Industrial Development Corporation. The proposal came under fire after villagers alleged misappropriations in land sale to real estate majors.

The opposition is on three main issues: displacement from prime agricultural lands, access to water resources and large-scale migration from other states. Migration, the protestors believe, will upset the state’s harmony and create law and order problems — not to mention, put pressure on available resources. The other major reason, and this is common to anti-SEZ protests across the country, is the perceived role of the State in acquiring lands on behalf of industry. The State is seen as colluding with industry in ‘grabbing’ arable land and, thus, the livelihood of people. Considering that there is no data of the employment generated by SEZs with their thrust on IT, ITeS sectors, which are not labour intensive, such fears are understandable. While the people are losing land, the industry is perceived to be in a win-win situation with the tax breaks provided

Here is the HT editorial team’s prescription:

The SEZs will only become attractive if the approach is inclusive. They will be attractive if the compensation is commensurate. Gujarat has shown how the process can be carried out effectively. But first, the State needs to be seen as a protector, not as an aggressor. The scramble among Chief Ministers for rosy figures will not take us anywhere, because figures seldom tell the true story. For the sake of the reputation of SEZs — not to mention the well-being of people — the State must understand this.

For previous blog entries detailing SEZ troubles in other parts of India, click here, here and here.

Update, Jan 03: In the comments section, Umakanth notes that the Central Government has taken issue with the Goa government's decision to scrap all SEZ projects, and suggests that this has now become a Federalism dispute, which may end up in court. As this news-item from today's issue of the Indian Express details, the Central Government seems to concede that the Goa Government does have authority to cancel pending projects, but disputes the state government's ability to cancel the three projects that have already been notified by the Centre. The article also notes the political complications involved, since Goa is currently ruled by a Congress government, and the current Chief Minister was intimately involved with the previous government's decisions to approve the SEZ projects.

Given all these factors, unless a private party that is adversely affected by the decision to scrap the SEZs takes this to court, my own view is that this is likely to be settled behind closed doors, among the powers-that-be in the state and central Congress circles. Umakanth's point is, however, valid for other SEZ projects, where the state governments involved are ruled by non-Congress parties. Observers of the Indian polity have long foretold the coming battles over our unwieldy Federal system, which was created to cater to the situation existing in India in the 1940s. Perhaps that battle will be joined over the issue of SEZs.